Unit 6: External influences on business activity

Question 1

Define balance of payments

Answer 1

The difference between the value of imports and exports of a country over a year.

Question 2

Define inflation

Answer 2

The price increase of goods and services over time.

Question 3

Define level of employment

Answer 3

The proportion of the population that are capable of working but are unable to find a job.

Question 4

Define gross domestic product

Answer 4

The value of all goods and services produced by a country over a year.

Question 5

Explain the 4 different business cycles

Answer 5

1) Growth - where the economy recovers/grows.
2) Boom - the peak of the business cycle, where business investments and profits are at their highest and most sectors in economy are performing their best.
3- Recession - Where the economy shrinks in size, less investment, decline in economic activity.
4- Slump - when the recession stage of the economy is at its worst.

Question 6

Define interest rate

Answer 6

The cost to a person or business when borrowing money from a lender/bank.

Question 7

Define tax

Answer 7

a charge/fee paid to government on income, goods and services.

Question 8

Define direct tax

Answer 8

The tax charged on personal income or tax on the profit made by a business.

Question 9

Define indirect tax

Answer 9

The tax charged on the price of goods and services, which is added to the price of goods and services before they are bought.

Question 10

Define disposable income

Answer 10

The amount of income left for consumers after all tax has been paid.

Question 11

Negative impacts of tourism industry on the envirnment

Answer 11

• Increased pollution through littering, noise and air pollution.
• Construction of buildings lead to soil erosion and loss of habitat for animals.

Question 12

Positive impacts of tourism on the environment

Answer 12

• Additional work for local construction businesses.
• Spreads awareness and helps in the conservation of wildlife and natural resources.

Question 13

Types of waste produced by business activities

Answer 13

• IT waste
• Paper waste
• Commercial waste
• Packaging waste
• Chemical and hazardous waste

Question 14

Define eternality

Answer 14

The effect of business activities on unrelated parties.

Question 15

Define social cost

Answer 15

The negative impact of a business decision on society.

Question 16

Define social benefit

Answer 16

The positive impact of a business decision on society.

Question 17

Define cost-benefit analysis

Answer 17

Analysis of the costs and benefits of a project, the focus being on the social costs and benefits.

• The social benefits must outweigh the costs, and the interest of the various stakeholders must be taken into account.

Question 18

Define sustainable development

Answer 18

A business activity is said to be sustainable if it has an overall impact on the environment and its stakeholders, ensuring its survival in the future.

Question 19

Environmental indicators of sustainable development

Answer 19

• Conservation of natural resources.
• Conservation of forests and habitats.
• Use of renewable energy (solar and wind power).
• Reduction of greenhouse gas emissions.

Question 20

Social indicators of sustainable development

Answer 20

• High life expectancy by generating less pollution.
• Fair compensation to employees.
• Ethical business decisions by conducting a social cost benefit analysis.

Question 21

Economic indicators of sustainable development

Answer 21

• Low unemployment by providing work to people.
• High literacy rates by setting up training and knowledge sharing programmes for employees.
• Growing GDP by generating products and services.

Question 22

Methods pressure groups use to make their points

Answer 22

• Demonstrations
• Boycotting
• Petitioning
• Increasing awareness of the issue

Question 23

How do businesses respond to environmental pressures

Answer 23

• Reducing their use of energy.
• Following sustainable business practices.
• Using green manufacturing methods.
• Taking legal action against pressure groups.

Question 24

Advantages and disadvantages of ethical behavior

Answer 24

Advantages:
- Improved image and reputation, which helps in attracting new investors and allow business to grow.
- Can be a motivating factor for existing staff.

Disadvantages:
- High costs when choosing raw materials ethically.
- Costs increasing by improving working conditions and pay for employees, and not using cheap child labour. All this leads to lower profits.

Question 25

Define multi-national company

Answer 25

An organisation that has operations in more than one country.

Question 26

Define globalisation

Answer 26

The process of which countries are connected with each other because of the trade of goods and services.

Question 27

What are the characteristics of globalisation

Answer 27

• Global recognition of brands.
• Growth in international trade.
• Dependency on global economy.
• Greater movement of products, services, people and money.

Question 28

Define trade bloc

Answer 28

A group of countries that trade with each other and are all part of a free trade agreement.

Question 29

Define home country

Answer 29

The domestic country where a multinational company first starts its operations.

Question 30

Define host country

Answer 30

The foreign country where a multinational company sets up its operations.

Question 31

Opportunities of globalisation

Answer 31

• Businesses can access more markets, which leads to increased sales.
• Labour may be cheaper in host nations and so businesses gain from lower costs.

Question 32

Threats of globalisation

Answer 32

• Local businesses in the host country may suffer as foreign companies start to sell their products at a cheaper price.
• Exchange rate fluctuations may cause lower profits.

Question 33

Define tariffs

Answer 33

A tax applied to imported and exported goods.

Question 34

Define quota

Answer 34

A physical limit to the quantity of goods that can be imported and exported.

Question 35

Benefits of a business becoming multinational

Answer 35

• Easier access to raw materials.
• Lower cost of labour.
• Economies of scale.
• Access to bigger markets.
• Lower production costs.

Question 36

Threats of a business becoming multinational

Answer 36

• Shortage of labour.
• Lack of information about the local market.
• Language barrier.
• Expensive labour costs.
• Little brand awareness.
• Currency fluctuations.

Question 37

Benefits of a multinational to host country

Answer 37

• Provides employment opportunities.
• Knowledge-sharing.
• Increases the choice and quality of goods and services.
• Improves the country’s reputation.

Question 38

Drawbacks of a multinational to host country

Answer 38

• Undue influence of on the government.
• Increased competition.
• Exploitation of natural resources.
• Less sense of social responsibility.

Question 39

Define exchange rate

Answer 39

The rate of which one country’s currency can be exchanged for that of another.

Question 40

Define depreciation

Answer 40

A currency is said to depreciate if the value of currency goes down with respect to another.

Question 41

Impacts of exchange rate depreciation on businesses

Answer 41

Impacts on importers:
- Imports more expensive.
- Business who rely on imports have to pay more.

Impact on exporters:
- Exports are cheaper overseas; increases the demand for them.
- Businesses which export will benefit from increases sales.

Question 42

Impacts of exchange rate depreciation on country

Answer 42

• More demand for currency so value of currency rises.
• More exports lead to an increase in balance of payments.

Question 43

Define appreciation

Answer 43

A currency is said to appreciate if the value of the currency increases with respect to another currency.

Question 44

Impacts of exchange rate appreciation on businesses

Answer 44

Impacts on imports:
- Imports are cheaper.
- Business who sell imported materials would benefit from reduced costs.

Impact on exporters:
- Exports more expensive overseas.
- Business who export suffer from reduced sales.